Monday, January 18, 2016

Consume or Invest: What Do/Should Agency Leaders Maximize?

William E. Kovacic, George Washington University - Law School and David A. Hyman, University of Illinois College of Law ponder Consume or Invest: What Do/Should Agency Leaders Maximize?

Abstract: In the regulatory state, agency leaders face a fundamental choice: should they “consume” or should they “invest?” “Consume” means launching high profile cases and rule-making. “Invest” means developing and nurturing the necessary infrastructure for the agency to handle whatever the future may bring. The former brings headlines, while the latter will be completely ignored. Unsurprisingly, consumption is routinely prioritized, and investment is deferred, downgraded, or overlooked entirely. This essay outlines the incentives for agency leadership to behave in this way and explores the resulting agency costs (pun intended). The U.S. Federal Trade Commission’s health care portfolio provides a useful case study of how one agency managed and minimized these costs. Our essay concludes with several proposals that should help encourage agency leadership to strike a better balance between consumption and investment.

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